Last October when Edmonton city council voted 10-3 in favour of the funding model for the new arena in Edmonton I thought it was a good deal. I was surprised at how some felt the city was actually get the raw end of the deal. Some felt the city was taking all the risks, with no reward, even though that wasn't the case.

The reason I liked it was that I compared it to other deals in recent markets. I caught up with Andrew Conte, writer at the Pittsburgh Tribune-Review and author of Breakaway, a book about the Penguins. It focused on the behind the scenes negotiations of a new arena in Pittsburgh and how gambling money is essentially funding the arena.

As you all know the Katz Group and the City of Edmonton have yet to agree on a funding model for the new arena. The Mayor and many councillors thought they had the framework to a deal, but the Katz Group clearly doesn't.

Rather than go around in circles about that, I thought I'd find out how they got it done in Pittsburgh.

A casino licence in Edmonton could ultimately play a huge role in getting this deal finalized. From what I understand, the Katz Group has been unable to secure a licence. Sources tell me that the provincial government has put a stop on new licences for the time being. The Katz Group offered to buy the licence from the Baccarat Casino, but to date they've been unsuccessful. If they get a licence that might be the final piece of this agonizingly long process.

Conte broke down the Pittsburgh deal:

Jason Gregor: Now that you have the arena, what is the feeling in Pittsburgh? Did either side, city or Penguins, win the negotiations?

Andrew Conte: No. I think everybody here feels now that it's all done that it was a clear win for everybody. I mean, this was the sort of situation where the public, the fans knew this was going to be a great team, that they had the potential to win the Stanley Cup when this was all coming together. And of course, once it did come together, there was agreement to build the arena, then the Pens go out and they win the Cup, and it sort of was a good feel thing there.

Even from an economic standpoint, you don't hear of people here griping about it now and saying we were taken advantage of or the Penguins got an unfair deal. In a sense, sort of everybody compromised, I think. But it's also because during the process there was this sense of what you guys are feeling right now, you know. Yeah, the team really could leave. They really could go somewhere else. I think when you get to that point of the discussion it becomes a real game changer.

JG: The Penguins pay about $4 million a year for the arena. Is that right?

AC: Yes.

JG: And then there's a ticket tax, but that actually goes back to the Penguins because they pay for the operating costs.

AC: The main financing for the arena here comes from the casino in the city of Pittsburgh. And originally ‑‑ some of your listeners might remember that the Penguins tried to get the casino license themselves. They partnered up with a company. This company, Isle of Capri Casinos, said, "Look, if we get the license, we'll give you $290 million. Go build your arena. Day one, go do it."

Well, the State decided they didn't want to do that, and that's when it fell apart. They came up with this deal where the casino contributes about $7.5 million a year, and then the State contributes another $7.5 million from its share of the gambling proceeds from across the state.

JG: So gambling proceeds from across the entire state put in the $7.5 million, the casino puts in $7.5, and then the Penguins put in $4. So that's about $19 million a year. Correct?

CE: Right, and the Penguins got the naming rights for the arena. So the money that came in from that would go towards their four million that they contribute.

JG: Does the ticket tax go back to the Penguins?

AC: The ticket tax here was not a part of the original deal. Basically what the deal here is the Penguins get to operate the arena. So whatever they make on off nights, off‑hockey nights, that all goes to the money that they would make. Any ticket tax would go probably into a reserve. The way it's worked here, the arena is actually held by an authority, and so they hold back a certain bit of the money for whatever goes into, you know, future repairs. Like, the football stadium we have here, they used that ticket tax money to put in a new high‑definition Jumbotron a few years ago. But since the Penguins are responsible for the operating costs and upgrades that is “technically” their fund.

JG: What was the biggest benefit to the City of building this new facility? Do they get all the new tax dollars from it? How are they benefitting?

AC: I think essentially that, one, you keep the team here. So you've still got the Penguins here. And then you've got this new facility where on 200 nights a year, on all the off nights, you've got other events going on. You know, Madonna is coming to town. Madonna never came to town before we had this new arena. She wouldn't come to the Civic Arena, but she comes to the new place.

So those sorts of benefits, the economic benefits of people who didn’t come here before are now coming in. And then what you have got is all around the arena. The Penguins built a new hotel right next to the arena, and they have got plans now to own the site where the Civic Arena was ‑‑ it's right at the edge of downtown, and they're planning to hopefully build some sort of a new neighbourhood there as well. So you get rebirth on this piece of land right in the centre of downtown.

JG: Did you say the Penguins built the hotel or just a hotel was built?

AC: Yeah, the Penguins. The Penguins ‑‑ that was part of the original deal ‑‑ they got the development rights for the land around the arena as well. That was part of the deal. You know, if there was any acrimony after the arena deal, it was over what to do with the old arena. You know, the Civic Arena, people were nostalgic about it. When it was built in the 1960s, it was a real state of the art kind of thing and kind of put Pittsburgh on the map. I mean, the Penguins are named for the old arena. It had a big silver dome. It was called the igloo. So when we got an NHL team, it was named due to the connection to the arena.

There was a lot of dispute in the community about should we save the arena, should we do something with it, should we do something new with it. But in the deal that the Penguins had reached with the public, it said right in there that the Penguins would get the parking revenue. The site where the Civic Arena used to be is now a surface parking lot. The Penguins get revenue from that, and then they get the rights to develop that land. They have ten years to develop it. If they don't, then they start losing parcels.

JG: So the City fronted all the money and the $7.5 million is paying off that loan?

AC: Originally there were bonds that paid for it. Both the casino and the State are paying their portion and the Penguins as well. That was one of the points of contention after the casino process here. Was that the amount of money ‑‑ the casino commission -- If you do $7.5 million for 30 years, it's a lot of money. But the fact is you can't borrow the same amount of money. You have to pay for interest and those sorts of things, and so that's where they didn't have enough money to actually build the arena.

JG: So this came from bonds and none of it was taxpayer dollars?

AC: Right. They borrowed the amount of money to build the arena. It was all bond money. Once they had two revenue streams ‑‑ they had the casino money and they have the State putting in the money ‑‑ then they were able to borrow against these dedicated revenue streams. They went out and borrowed money to build the arena with, and they're using these dedicated revenue streams over 30 years to pay down the bonds. The City itself didn't kick in anything here. It was the casino and then the State using its share of the slots money.

JG: So the city pays $7.5 million a year?

AC: No, the City doesn't pay anything. The City of Pittsburgh pays nothing. It's the State of Pennsylvania that pays $7.5 million a year, and the casino here pays the other $7.5 million.

JG: Are you saying that people in Pittsburgh don’t look at the city of Pittsburgh casino money as quasi tax payers dollars. The city would recoup if the arena wasn’t there.

AC: That's the beauty of gambling money. That's why they are putting casinos all over North America now. Taxpayers don't look at it as tax money; they look at it as gambling revenue. In (my book) Breakaway I go into great detail about how governments all across the United States ‑‑ and I know it's true in Canada because I've been up there and gone up to Windsor for a story on gambling -- are doing this.

Politicians are happy to bring in the casinos, and taxpayers are happy to have them do it. When we were getting the casinos here in Pittsburgh, there were 14 across the state that have been legislated, but aren’t all open yet, the biggest complaint was not why are you bringing casinos here; it was why don't you have them here yet? How quickly can you get them open? I think because its slots money people have not looked at it as tax revenues.

In reality, I'm sure the State could be using that portion for reducing property taxes or investing in schools or any other kind of infrastructure.

JG: When you look at this deal now, it cost $321 million for that facility. Did Pittsburgh get any rebates on that cost?

AC: There was an acceptance at some point that, you know, there's the stadium that we'd like to have and there's the stadium that we can afford. And I think that's the conversation you're going to have there in Edmonton too. Some of the renderings I've seen for the arena there, they look beautiful. It's going to be a ‑‑ it would be a beautiful building. It would put Edmonton on the map as an architectural place.

I mean, it's a fantastic facility, but is it a facility that you can afford? Or could you get by with doing something smaller that is going to still be nicer than what you've got? It's going to be generating revenue for the community and it's still going to be a great facility, but it's going to cost less. You know, that's a discussion for the community to have.

WRAP UP

When you compare the deal the Penguins got: free land beside the rink, only $4 million payment a year, the naming rights and the ticket tax goes into a fund to refurnish the arena, the deal the city of Edmonton brokered last October looks pretty good. We all know the arena deal will eventually go through, and the casino licence might be a small part of the deal.

One of Canada's most versatile sports personalities. Jason hosts The Jason Gregor Show, weekdays from 2 to 6 p.m., on TSN 1260, and he writes a column every Monday in the Edmonton Journal. You can follow him on Twitter at twitter.com/JasonGregor

I can't belive how narrow minded everyone is over this topic. It seems just like the CBA crap, evryone with a brain knows it has to get done and those who can actually do something about it can't remove their heads from their collective back sides long enough to get it done.

There are 6 casinos in Edmonton (7 if you include River Cree). It's too bad Baccarat, Northlands,Century are within 4KM's of each other. And Argyll just south of Rexall. AGLC won't allow another licence in Edmonton. So, either Baccarat, or Northlands will have to partner or sell to Katz.

VLT's pay-out 30% of what they take in monthly, and the Alberta government takes a huge chunk for charity. I'd prefer to see the funds go to something that gives back to all of us. (That can afford to pay for NHL games and concerts)

It was probably easier for Pittsburgh to support building the Consol Center after they built Heinz Field, and PNC Park 10 years earlier. How many renos have been done to Commonwealth, Ducey Dome, and Rexall Palace? It's time for something new.

Revenue that is foregone in one area must necessarily be made up in another. This is axiomatic. Hence public casino revenue that is spent on private goods like arenas is revenue that is not going to schools and roads. Thus the taxes that do go to schools and roads are higher as a result. Consequently casino revenue spent in this way is a tax on everybody.

That people don't understand this is evidence that people are stupid, hence Tyler's post.

Revenue that is foregone in one area must necessarily be made up in another. This is axiomatic. Hence public casino revenue that is spent on private goods like arenas is revenue that is not going to schools and roads. Thus the taxes that do go to schools and roads are higher as a result. Consequently casino revenue spent in this way is a tax on everybody.

That people don't understand this is evidence that people are stupid, hence Tyler's post.

Casino money, generally, is targeted at community projects not for "schools and roads" as you so ham handedly supposed.

Gregor, great interview. I think another missing piece might be the bonds. Seems like in the States bond issues for projects like this are easier. I doubt the gov't could do a bond issue, but how about Katz Group?

Gregor, why the turn around? I spent the summer listening to you go on and on about how Katz practically raped the city in this deal. How it "was not even close as to who won the negotiations. I remember thinking that no good could come from talk like this , and that it was like pouring gasoline on the small minded, jealous, what about me, let the billionaire pay for it, Rexal is still great, it's okay to subsidize Northlands, our downtown is fine, no taxes for something I never use unless it is a art gallery or a museum or a sporting complex on the other side of the city where it will have little affect on civic pride, ...bonfire.

To intrude into the debate between Captain Obvious and DFS.
There are two types of casinos in Alberta: Traditional and First Nations. Then there are slots at Northlands, which has a different system on revenues that benefits the Horsemen.

The traditional casinos are financed and operated by private investors. Net gaming revenues (gross revenues less prizes) on table games are split 50/50 between the operators and eligible Alberta charities and on slots the split is 15% operators, 15% charities, and 70% AGLC on behalf of the Government of Alberta. The GOA appropriates their 70% to a number of sources, including government departments for social services, and to a different and bigger group of charities, e.g., public art galleries, museums.

So, if the Oilers were granted a casino licence, their share of the net gaming revenues would be 50% of table games and 15% of slots. The real money is in slots, but the 15% of slots in today's gaming market would hardly pay for a new casino much less contribute significantly to the arena as the operators' 15% split goes toward amortization and interest on capital and against operating costs.

If our billionaire owner was also an eligible charity, he could receive 30% of the split on slots, and if he were the Chief of an Indian Band, the split on slots would be more lucrative, approx 45%, or if was the Horseman at Northlands. But he is not.

Bottom line: The Alberta gaming market and GOA policy on gaming precludes Katz making much money from operating a casino, if he was granted a licence, which appears to be dubious. Getting a casino licence is a red herring in the negotiations. I would be really surprised if the Katz Group wasn't aware of these facts. When was the last traditional casino built in Alberta?

Speaking of Pennsylvania, its population is approx. 13 million to Alberta's 3.6 million, appears to have less casinos than Alberta and is obviously more generous than the GOA.

You can't possibly believe this is true. In any case, the term public good has a very specific meaning and it isn't what you think it is.

An arena might be what economists call a "club good." It has the appearance of a public good because one persons use of it does not use it up for other people. However, because the use of the good is excludable (in this case by market pricing of access to the arena), it is not in fact a public good. Public schools, by contrast, are in fact public goods (that is their use does not diminish the stock and individuals cannot be excluded from using the good).

The problem with government subsidizing of club goods is that the enjoyment of the good is, by definition, not the public the government represents. Which is why nobody thinks the city should be building other forms of private entertainment. This is why the city is selling the project in terms of downtown revitalization which is, in fact, a public good. The problem here is that no one actually thinks that the arena will cause downtown revitalization, certainly not efficiently. It's a proxy argument, not the actual argument.

Look, I know you like to stir it up, but if you're going to express yourself in words it is your responsibility to understand what those words mean.

An arena is not a public park. It isn't a public good. That's just the facts.

You don't get to define words anyway you please just because it suits your argument. That's not just small-minded, it is petty and ignorant.

Honestly, spend some time googling articles on publicly funded stadiums and arenas. You will find the information depressingly familiar to our sorry state.

Some choice clips:

"Public subsidies pad the bottom lines of team owners and boost player salaries while offering no real economic benefit to the cities involved. ... They provide another example of government action whereby the few and the influential benefit at the cost of the many."
- economist Raymond Keating

But you think the arena is necessary to make the Oilers stay. You've heard words about an ironclad 35 year lease. Didn't Edmonton already build a stadium for the Trappers and didn't they leave. Why is that?

Keating again:

"Another major downside to government-built and -owned ballparks is that clubs are transformed from owners to renters. It is always easier for a renter to move to get a better deal. So, government officials who advocate taxpayer-funded sports facilities to attract or keep a team virtually ensure that teams will continue issuing threats and moving."

Do some research. It's impossible to find anyone other than team owners and under pressure team executives who think these things are good ideas.

Gregor, why the turn around? I spent the summer listening to you go on and on about how Katz practically raped the city in this deal. How it "was not even close as to who won the negotiations. I remember thinking that no good could come from talk like this , and that it was like pouring gasoline on the small minded, jealous, what about me, let the billionaire pay for it, Rexal is still great, it's okay to subsidize Northlands, our downtown is fine, no taxes for something I never use unless it is a art gallery or a museum or a sporting complex on the other side of the city where it will have little affect on civic pride, ...bonfire.

Slyers,

Please find the tape where I said this. Never once did I say he won. I've said it was a good deal for both sides, and in fact the city fine.

I've said all along the deal was good because Katz had to pay operations costs and all upgrades.

If you listen, like you say you do, you would note that I've been in favour of a new rink. Not for the Oilers, but for our city. We need one. We have way too many people who don't think longterm.

Current Casino Revenue at Baccarat benefits local charities, there is a baseline of revenue for past years. WAM optioned the land to Rexall Sports with the clause that Gateway Casino's (Baccarat Parent Company) hold and maintain the license via the GOA, on the property from a management perspective. As stated earlier by DON DON, there is not enough new revenue, from an incremental perspective to make a difference. Ironically, the Oilers held the option and forgot to renew it, and it was picked up by WAM, creating a shotgun arrangment with Rexall.

I am confused and perplexed over the issue of the agreement between the city and Rexall Sports, since the funding model is still short $100million dollars.

Brownlee adamantly called Katz a billionaire with a B, on hour 3 wednesday after the spec report. I don't recall anyone from the Rexall Camp disclosing of DK finances to make this an accurate statement. If you believe Forbes, I have a Levitt report to sell you.

If you have 2.5 billion in assets and 2.4billion in debt, that makes you a multi millionaire, taking advantage of public perception in the past. I am waiting to see if Shoppers or CVS picks up Rexall - Med Shoppe via a Wallstreet Garage Sale. Funny how public perception has changed.

I am concerned that if the city loans Katz his $100million for the rink, there is no actual equity protection for the taxpayer. With a loan on the team, a loan on the owners house, there is not much THERE-THERE with this cat, I would consider in my opinion Katz more George Gillette or Nashville Boots, than Buffalo Owner Pegula.

If the NHL wants 50-50, then why wouldn't our local downtown entertainment district deal of $175million rexall, $175million city, $150 million ticket surcharge. Seems this is a hurry up and wait, until the province tells Mandel to shove it up his river, and use his MSI money as he see's fit.

A snapshot of the Bluejackets and Hurricanes shows losses of $25million per year, Anaheim is in the same neighborhood due to flaws in revenue sharing and a poor market.... the Oilers are chained to Edmonton, under Bettmans ego, wallet and watch. At a profit rumored to be $18million for a non playoff management - team result. It seems that the Oilers are profitable, just not profitable enough.
I think many NHL owners are shaking their heads at our leveraged owner here in YEG. The people in Buffalo are so lucky, Terry Pagula has been quoted that if he wanted to make a better investment, he would of drilled another oil well. Pagula is a hockey fan with billions, and he loves the city of Buffalo.

Unfotunately, in my opinion the same cannot be said for our current owner on many levels.

Current Casino Revenue at Baccarat benefits local charities, there is a baseline of revenue for past years. WAM optioned the land to Rexall Sports with the clause that Gateway Casino's (Baccarat Parent Company) hold and maintain the license via the GOA, on the property from a management perspective. As stated earlier by DON DON, there is not enough new revenue, from an incremental perspective to make a difference. Ironically, the Oilers held the option and forgot to renew it, and it was picked up by WAM, creating a shotgun arrangment with Rexall.

I am confused and perplexed over the issue of the agreement between the city and Rexall Sports, since the funding model is still short $100million dollars.

Brownlee adamantly called Katz a billionaire with a B, on hour 3 wednesday after the spec report. I don't recall anyone from the Rexall Camp disclosing of DK finances to make this an accurate statement. If you believe Forbes, I have a Levitt report to sell you.

If you have 2.5 billion in assets and 2.4billion in debt, that makes you a multi millionaire, taking advantage of public perception in the past. I am waiting to see if Shoppers or CVS picks up Rexall - Med Shoppe via a Wallstreet Garage Sale. Funny how public perception has changed.

I am concerned that if the city loans Katz his $100million for the rink, there is no actual equity protection for the taxpayer. With a loan on the team, a loan on the owners house, there is not much THERE-THERE with this cat, I would consider in my opinion Katz more George Gillette or Nashville Boots, than Buffalo Owner Pegula.

If the NHL wants 50-50, then why wouldn't our local downtown entertainment district deal of $175million rexall, $175million city, $150 million ticket surcharge. Seems this is a hurry up and wait, until the province tells Mandel to shove it up his river, and use his MSI money as he see's fit.

A snapshot of the Bluejackets and Hurricanes shows losses of $25million per year, Anaheim is in the same neighborhood due to flaws in revenue sharing and a poor market.... the Oilers are chained to Edmonton, under Bettmans ego, wallet and watch. At a profit rumored to be $18million for a non playoff management - team result. It seems that the Oilers are profitable, just not profitable enough.
I think many NHL owners are shaking their heads at our leveraged owner here in YEG. The people in Buffalo are so lucky, Terry Pagula has been quoted that if he wanted to make a better investment, he would of drilled another oil well. Pagula is a hockey fan with billions, and he loves the city of Buffalo.

Unfotunately, in my opinion the same cannot be said for our current owner on many levels.

Media reports since Katz initially tried to buy the Oil pegged his NET worth at $2 to $2.8 B. That would be assets minus his liabilities.

Where the media got their info I could not tell you. But what I can tell you is it would be impossible to gain $2.4 B in credit with $100 million in equity. Whatever his faults - this guy has financial clout.

Without de-railing the discussion too much, I'm curious to hear your thoughts on something. A friend and I were recently discussing the Green Bay Packers and wondering what sort of benefits the City of Edmonton could have on actually owning the Oilers. I realize this is completely hypothetical and not going to happen, but it just seems to me that there would be a lot of advantages to having the Edmonton Oilers publicly owned by the City. I honestly think ticket prices could end up being lower as a result and there would be a lot of opportunities to leverage off of other City resources. Also, we've been through these type of negotiations before with prior owners and I'm sure this won't be the last time.

The more I read about these arena deals the more this is starting to bug me for the following reasons:

1) Owners crying poor over spending 3-5 million annually on arenas seems disingenuous when this represents 4-7% of the salary cap.

2) I'm uncomfortable with linking this to casino dollars. Some of this money comes from healthy people out for a good time. A lot of the money comes from gambling addicts who are unhealthy and ruining their own and their family's financial footing. Addiction does not equal stupidity.

3) Owners typically do not invest any money annually for a future arena which reliably need to be built every 40 or so years, and instead come looking for a public handout.

Combining this with economic studies that show essentially 0 economic impact of arenas and it gets harder to support the current dependence of owners on the public purse.

Since I just read this about the Vikings new stadium here is an excerpt

"The new facility will replace the Metrodome, the team's current home on the eastern edge of downtown. The public is contributing $498 million through gambling taxes and Minneapolis hospitality taxes. The team and private sources are paying $477 million."

So just some info. When you own a casino you are the operator but you don't "man" the tables with your own staff...the folks that do man the tables are the charity groups and they get the coin from the tables...there is a MASSIVE wait list by charities to get into these casinos to have their fundraiser...if the Katz group were to get the Casino...which they can do I think...they would not be able to qualify for more money under the current set up than what any other regular operator would get...and the charity would still need to operate those tables and get the coin made off of that. So if Katz were to strike a different deal with the province and remove the Baccarat casino from the list that charities could access they would then therefore increase the wait times for all the charities...hooo baby the province would have a political wreck on their hands. I would highly doubt that politically, the province would side with a billionaire and millionaires instead of charities...the pressure from the charitable groups is massive...way more than anything we as oiler fans can pressure...and if you don't believe look at the deal Horse Racing Alberta has with the province and the trouble that get's the government into...btw...northlands has the race track...not a casino - and there's a difference...that's the only reason they have slots...because of deal struck a long time ago...and it is a massive headache for the government.

The "casino" deal will never go unless Katz will stand up in front of the public and explain why the Oilers are more important than a charity...don't see that happening. Ever. Unless he can convince us all that the Oilers are a charity?

Maybe Katz wants to talk to the Native Canadian group that owns the River Cree about a new arena,hotels,condos the works-- the citys growing there already anyways and a SUPER casino,I wonder how that would fly?Who says he needs to make the arena accessable easily??He would still get sellouts every night if people hat to drive to the River Cree Arena Complex,ha ha ha. Anyone do that in America yet??